Better Jobs, Higher Incomes and a Secure Retirement INTRODUCTION 1. I would like to thank members for your comments and questions. 2. Before I respond, let us take a step back to talk about our longer term goals for Singapore. While I address the specific cuts, I think it is important to remember what exactly we are trying to build here in this place we call home. We want to build on what we have achieved over the many years, and work towards creating an environment where there are better jobs, higher incomes, and a more secure retirement for all Singaporeans towards their latter years. 3. I have met many people in the course of my work, and everyone is at different stages of their lives, each having their own aspirations, their own expectations, different opportunities and challenges facing all of them. Everyone has their own story to tell. Our shared vision must be expansive enough to reflect these differing aspirations, and our society must be inclusive enough so that everyone has a stake in our future. 4. In this inclusive society we call Singapore, all Singaporeans must have access to quality jobs. Whether you are looking at something fast pace, or something slower pace, something meaningful or something financially rewarding, that range of opportunities must be created. Therefore, we must nurture a vibrant economy to anchor quality jobs in Singapore. We will equip our people with the necessary skills for these jobs, and to help them continuously upgrade themselves to remain relevant throughout their lives. We should have safe and progressive workplaces. And when some falter, as invariably some will do, we must be there to support our fellow Singaporeans, helping them get back on their feet, so that they can in turn look after their loved ones. 5. This will be a society where everyone can maximise his or her potential and to realise their aspirations. Where every Singaporean can take pride in being really good at what they do and are recognised for their skills, regardless of their academic qualification, regardless of the schools they come from, regardless of the uniform they wear, or the sector they work in. Underpinning this, there must be an open and level playing field for everyone to have a fair chance to progress based on their skills, based on their effort and own merit. 6. At the end of a fulfilling career, we want each and every Singaporean to have peace of mind in retirement. A secure retirement that is made possible primarily by our own savings but a system that does not impose a burden on future generations. For this to happen, we need a savings system that is anchored on personal responsibility, but with employers and the Government pitching in and playing a critical role to augment it. A system that is flexible enough to cater to differing Singaporean needs, but at the same time remembering very clearly that we cannot compromise its core objective of helping Singaporeans to set aside sufficient funds for their retirement years. 7. Visions are important, but in this society that is based on a democracy of deeds, we must be able to translate these ideas into realities for all Singaporeans. Words are cheap, but actions speak a lot louder. But as we all know, there are no straightforward answers because there are so many perspectives to consider and difficult trade-offs to be made but the effort must be put in to see how inclusive we can be. We need to balance the needs of the individual with that of society, we need to meet the needs of today but at the same time, to make sure that we look after the needs of our children’s generation and the generations beyond that. 8. We are making steady progress towards our goals. We are not doing too badly. In 2014, our economy grew 2.9%, creating 129,0001 new jobs. These are the opportunities for our people. Citizen unemployment rate remains low at 2.9% 2 , and as I have always mentioned, low unemployment does not mean zero unemployment. It is one of the lowest in the world. In 2014, real3 median income, meaning that you have compensated for inflation, grew by 1.4% 4 . If we looked at a longer 5-year time horizon, and we take out year-on-year volatilities, between 2009 and 2014, real incomes have grown by 2.1% per annum at the median, and 1.5% per annum at the 20th percentile5 . We have managed to achieve positive real income growth, and avoid the wage stagnation that many developed economies are facing. I am always reminded of this every year I meet with my G20 counterparts. I do not relish the challenges that they are grappling with – high youth unemployment, high unemployment, slow economic growth, wage stagnation and in some countries, the wages have been stagnating for many years. In some instances, wages have declined. It is important to look at what is happening in the rest of the world because the same pressures that are brought to bear in those societies are happening to us as well. But we are managing quite well. 9. We are in a relatively strong position. But as we continue to build on what we have achieved, we must also ensure that Singaporeans who encounter difficulties are not left behind. These are hardworking Singaporeans who lose their jobs when companies restructure. Restructuring is inevitable as the world changes. Their skills may have become outmoded and they have difficulties finding new jobs when they are in their forties and fifties, when they still have to support their families or have mortgages to pay. Mr Ong was retrenched after working for seven years with his company. Even though he was given a retrenchment package, he was anxious to get back to work as he needed to support his family, especially his two school-going children. I could only imagine how difficult those times were. Mr Ong, with guidance from his career coach from the WDA Career Centre, managed to secure a position in Beyonics as a Program Manager. The new job is now nearer his home, and with the shorter commute, he can spend more quality family time with his children. Mr Dharmarajan, 55, was retrenched in 2014 because his company relocated to another country. His career coach from WDA referred him to the Jobs Bank, where he subsequently found a new job, with a pay rise. 10. Today, I will talk about our plans to help more Singaporeans like Mr Ong and Mr Dharmarajan secure quality jobs and opportunities through better skills and to prepare our people for the future. I will also talk about enhancements to the CPF system to better meet diverse retirement needs. SMS Amy Khor will speak about the Fair Consideration Framework and the Jobs Bank, helping older workers remain in employment, and mechanisms for dispute resolution. Senior Parliamentary Secretary Hawazi Daipi will cover further measures to uplift incomes in low-wage sectors and improve workers’ safety. Structural Shifts in Our Labour Market 11. As Mr Zainudin Nordin has pointed out, to be successful in the next phase of our economic development, we need to prepare and adapt to the structural shifts that are taking place in our economy and labour market, and to adapt to the world that is changing exceedingly fast. Over the next decade, our labour market will tighten further, and rapid advancements in technology will change the way we work, the way we communicate and the way we do business. 12. Let me first elaborate on the tightening labour market. a. We commenced tightening the labour market in 2010. In the past few years, our deliberate policies have moderated foreign workforce growth steadily and progressively, from about 80,0006 in 2011, to about a third of that, 26,0007 in 2014. This is not because we have become manpower lean. In response to Mr Thomas Chua, we are still some distance away from the world’s most advanced economies. In the Construction sector, our value added per worker is only a third of that in Finland, in Denmark and half of that in the United States and Japan. In the Services sector, we are around 70 to 80% of that in the US or Japan. b. While foreign workforce growth has slowed, some companies have transformed but many companies resorted to hiring more local workers instead of restructuring or economising on manpower. The local employment growth was 95,0008 in 2014. This is more than twice of the 38,000 in 2011. c. Having more jobs for locals is of course a good thing. So the high labour force participation rate is great and is good to see more women and older workers coming back into the workforce. What happens is that they contribute to augmenting household incomes and the data on that front has been very positive and strong. Unfortunately, this increase in local hiring sometimes allows companies to avoid the restructuring and the changes that they need to make. And this increase in local hiring will not last. In fact, we expect our local employment growth to slow dramatically in the next few years, dropping from this base of 95,000 last year to around 20,000 per annum in the last part of this decade. This is largely due to our baby boomers gradually exiting the workforce, and our smaller cohorts entering the workforce. 13. I am highlighting this situation not to signal a change in our direction. There will be no change. We will continue to keep foreign workforce growth sustainable and allow it to grow at the current tight pace. The main message is this. Taken together with the slowdown in our local workforce growth in this coming years, companies must note that we will experience a very significant tightening of the labour market going forward. If businesses do not become manpower-lean, if they do not become more productive, they will have great difficulties in finding enough manpower – be it local or foreign – to run their operations. 14. The next significant change that I will like to talk about is technology. It is not new. Technology has always been changing businesses and jobs but it will do so at an ever increasing rate. Many of you would remember IBM Watson, the supercomputer that beat the world’s best Jeopardy! player four years ago. Since then, Watson has upgraded and has begun to assist human beings in actual work settings. At DBS Bank for example, Watson is now helping relationship managers read and process thousands of reports, crunch client data, and give unbiased, tailored investment advice to their clients. To give you a sense of the scale, DBS Bank itself produces about 700 to 800 such reports every quarter. In the past, it was impossible for any single relationship manager to read all these reports. But Watson can and given its huge computing power, it will continue to do so at increasing rates. 15. To remain competitive in this rapidly evolving environment, our businesses must capitalise on technological advancements to innovate, so as to establish new areas of competitive advantage, keep ahead of the curve, and grow within our national manpower constraints. DBS started using Watson for precisely this reason. Ms Frances Boon, Senior Advisor at DBS, told us that their adoption of Watson was a pre-emptive move. Rather than waiting for technology to impact DBS, they wanted to explore it first, so that DBS is ready to move to the new business models when change occurs. Up-Skilling Our Local Workforce 16. As our businesses restructure and move up the value chain, you will realise that jobs will have to evolve. Singaporeans need to move towards higher-value skills, so that they can stay relevant and capitalise on opportunities in the new-age economy. 17. Developing Singaporeans has always been our priority but this is the right time to make a further concerted push due to the shifts I outlined. Moving forward, it has to be about quality. Quality growth, quality companies, and quality skills in every individual. 18. With SkillsFuture, we have embarked on a major new phase of investment in our people, to develop every Singaporean to the fullest, not just in school but throughout life. SkillsFuture – Everyone Must Play Their Part 19. Now SkillsFuture can only succeed if everyone plays their part. a. First, employers. Today, many employers say that they cannot find Singaporeans with the right experience. But we all know no one is born with experience, it takes time and deliberate effort to develop this experience in our employees. In this tight labour market, employers have to shift away from this “plug and play” mindset to one which proactively develops every one of their workers, providing career pathways and valuing their contributions as they advance. Employers play a critical role in this. If you do not develop those pathways, if you do not develop a fair remuneration scheme, SkillsFuture, cannot take off, if you do not play your part. One way to do this is through offering meaningful internships, participating in the SkillsFuture Earn and Learn programme, or being part of the SkillsFuture Leadership Development Initiative. In turn, companies will have access to a more skilled workforce that will enhance their competitiveness and productivity. We will reach out to businesses to share with them how they can benefit from the various SkillsFuture initiatives. And I call on all companies to come forward proactively and be part of this process. b. Next, individuals. This is about you and I, every Singaporean. We must take ownership of our own learning and careers. We cannot think about lifelong learning as something that is more suitable for the rank and file or blue collar jobs. It is for everyone of us. Given how fast the labour market and skills needs are changing due to technology and restructuring, learning can no longer stop when we step out of school. We, as parents, teachers, and individuals need to constantly re-invest in learning, throughout our lives. The example of Watson earlier will show you that technology is not just impacting rank and file workers. It impacts the work of professionals as well. c. Finally, education and training providers. They must value-add to their students’ personal and professional development by offering relevant and high quality programmes. I will elaborate on this later. 20. So SkillsFuture is exceedingly important. And it is truly a national movement, involving all stakeholders. Government is a key enabler and we will provide the necessary infrastructure and resources. DPM Tharman had shared how SkillsFuture will support learning through a wide array of initiatives. I will elaborate further. Upgrading Our Training Landscape 21. First, on training landscape. We must ensure that the course offerings are of high quality, a wide variety, as Ms Rita Soh emphasised and delivered through multiple modes of learning. We have taken a significant step towards this with the opening of two new CET campuses last year. Mr Zainudin Nordin had acknowledged this. What we need to realise is that these CET campuses are focal points. They complement our universities, polytechnics, and ITE in providing a continuum of diverse learning opportunities for Singaporeans throughout life. Today, there are over 25 partners delivering training and other CET-related services at both these campuses. 22. I fully agree with Mr Ang Hin Kee, Ms Foo Mee Har and Prof Randolph Tan that we must ensure that this education and training is high quality, industry-relevant and ultimately it must deliver good outcomes for Singaporeans. 23. To ensure that courses are industry relevant, our Institutes of Higher Learning (IHLs) co-develop course curricula with the industry. Again, industry must play a part and participate in this. The various Singapore Workforce Skills Qualification (WSQ) frameworks were also developed in close consultation with the tripartite partners. This system has served us well, and our local graduates are highly employable. But we know that sometimes there are courses that will be less than ideal and we will weed them out and continue to improve. We can make things better, especially now that we are enhancing the education and training landscape. Moving forward, MOE and WDA will enhance existing accreditation frameworks, taking into account the important points raised by many of the members here about ensuring the rigour and relevance of training. Implementation Plan for SkillsFuture Initiatives 24. Mr Low Thia Khiang may wish to note that we will be implementing the various SkillsFuture initiatives in phases to ensure that the training landscape is able to develop in tandem with the new measures. We need to avoid a case where training institutions face this sudden surge in demand, and resort to offering sub-standard programmes or expanding class sizes and compromising on quality. This will lead to a wastage of both individuals’ time and public monies. Therefore, we have staged the implementation according to readiness and capacity. Let me elaborate. 25. We will start with a significant number of initiatives that are ready to go. These are the SkillsFuture Mid-Career Enhanced Subsidy, SkillsFuture Earn and Learn Programme, SkillsFuture Study Awards, SkillsFuture Leadership Development Initiative, and the SkillsFuture Mentors. 26. In 2016, we will implement the SkillsFuture Credit and the SkillsFuture Fellowships. Various MPs have asked questions related to the implementation of this SkillsFuture Credit. a. Under the SkillsFuture Credit, more than 2 million Singaporeans aged 25 and above will receive an opening balance of $500 in credits next year. Even as we do this, I fully agree with Prof Randolph Tan that we need to pay attention to the quality of outcomes, to ensure that courses are useful for both individuals and also for the companies. This will have to be balanced with flexibility in utilising the credits, which many people have called for. So again there is a balance. We want more diversity, we want easy accessibility but at the same time we also want accountability and a lack of wastage. Going to extreme ends on either front will cause problems. We need to find where that middle ground is. In order to galvanise a culture of lifelong learning, we have and we believe that we should take a broad approach of supporting work-skills with the Credit. Our intent is to help Singaporeans deepen their existing skills and also to provide options for people to broaden their horizons in areas outside their current fields. The courses we will support will clearly be diverse, comprising areas like aerospace, IT, and early childhood education, and also including areas such as languages and culinary skills, which some may have a strong interest for and wish to explore career opportunities in. Mr Ang Hin Kee asked about the specific criteria for courses to qualify for the SkillsFuture Credit. To ensure quality, courses will need support from WDA, MOE or other public agencies to qualify for the credits. We will look into the helpful suggestions from many of you to see how we can help Singaporeans from all walks of life to benefit, including stay-at-home parents, the self-employed, and also persons with disabilities. The full range of courses will need to be inclusive and will be released closer to the implementation of the Credit. b. Mr Ang Hin Kee and Mr Zaqy Mohamad were concerned that employers who are cutting costs may now ask their workers to co-fund the cost of training with their SkillsFuture Credit. Let me be very clear that the credits are meant to support training initiated by individuals, not to fund training which employers send them for. In any case, we will continue to support employers who send their workers for training, by providing substantial course fee subsidies. We will also extend the existing Enhanced Training Support for SMEs Scheme by a further three years, to give SMEs additional support to send their local workers for training. Training funded by the credits, which are meant for individuals, will not allow employers to qualify for absentee payroll from WDA. This is a built-in mechanism that will address some of the concerns raised. 27. Another key initiative is the Sectoral Manpower Plan (SMP). I shall not elaborate on this in detail as I had already done so in Parliament earlier, but I would like to highlight that one of its key objectives is to develop a deep pool of local talent in our key sectors, by building attractive skills-based career progression pathways, improving HR practices and enhancing workplace conditions. Over time, we hope that these efforts will help us build up a Singaporean core in key industries with the right skills and experiences, as suggested by Mr Zainal Sapari and Mr Yeo Guat Kwang. We will work closely with Trade Associations, training institutions, employers, and unions to develop and implement comprehensive SMPs in all key sectors by 2020, covering both growth sectors and traditional sectors. As for the core trade approach raised by Mr Yeo, we are open to exploring this with other agencies and other sectors as well. More Support for Singaporean PMETs 28. Let me move on to talk about supporting Singaporean PMETs. Mr Sam Tan, Ms Jessica Tan, and Mr Heng Chee How have asked how we are helping PMETs. As Mr Heng Chee How highlighted, the proportion of Singaporeans employed in PMET jobs has increased from 43% in 2004 to roughly half of our citizen workforce in 20149 , and this is projected to reachtwo-thirds by 2030. Our future economy in Singapore will be driven by a strong Singaporean core, with highly-skilled PMETs at the centre. 29. PMETS generally enjoy positive employment outcomes. Real median incomes 10 of Singaporean PMETs have risen 2.0% per annum in the past 5 years.The unemployment rate for Singaporean PMETs has stayed low at 2.9% in 2014, and the long-term unemployment rate has also remained low at 0.7% 11 . Although displaced PMETs are not a large group, the pressures of a rapidlychanging economy have caused some, especially mature PMETs, to feel anxious about their job security. And as I mentioned earlier, while the percentages are low, there are Singaporeans who are affected as well. Hence we need to look out for them and see how best we can help them. 30. We aim to maintain these good outcomes for our PMETs by putting in place policies in a way that is best tailored to their needs and circumstances. Helping PMETs Chart Their Own Learning and Career Development 31. First and foremost, we are empowering PMETs to chart their own learning and career development. The first thing that the Government can do is to provide a good suite of practical, useable online resources. If you are a Singaporean PMET looking for a job, you can start with looking at the Jobs Bank. Starting 2017, you will also have an Individual Learning Portfolio, which will provide a whole suite of tools and labour market information to help you to plan your career throughout your life. In the longer term, the Jobs Bank will also be integrated into this ILP. Helping PMETs Equip Themselves 32. Next, we are helping PMETs to equip themselves to achieve their career goals. PMETs are in fact a key focus under SkillsFuture, in three ways. a. First, we are helping PMETs progress further in their careers. The SkillsFuture Study Awards and SkillsFuture Fellowships will help individuals achieve skills deepening and mastery in their respective fields. We also want to develop Singaporeans for positions of leadership in our industries. This requires both depth and breadth, and both local and global experience. I am pleased to inform Mr Zainudin that the SkillsFuture Leadership Development Initiative will support companies to develop or enhance in-house programmes to groom their Singaporean employees to take on these leadership roles. This will help Singaporeans gain exposure and experience in key global or regional markets and critical business functions. The initiative will be implemented progressively across sectors from this year, and will build on existing efforts to develop a pipeline of Singaporean leaders, such as MAS’s Finance Associate Management Scheme and International Postings Programme, or EDB’s on-going engagements with companies to enhance their talent and leadership development programmes. I urge all Singaporeans to make full use of these opportunities to broaden their experiences and to deepen their international outlook. b. Second, we will finance an enhance funding support for mature PMETs. Education and training subsidies for all Singaporeans aged 40 and above will be enhanced to a minimum of 90% of training costs for courses funded by MOE and WDA. A minimum of 90%. This is a substantial increase from the current minimum subsidy of 75% for MOE courses, and 50-70% subsidy for WDAsupported courses. Courses already subsidised at above 90% will retain their existing rates. This will benefit PMETs substantially. Also because PMET courses tend to cost more, and so the absolute quantum of subsidy will be correspondingly higher. c. Let’s say you are a mature PMET and want to go for a WSQ Diploma and Specialist Diploma in Precision Engineering (Master Craftsman Skills) from Nanyang Polytechnic, which costs $27,200. The net course fee that you need to pay, with the previous 70% subsidy, was around $8,100. With the enhanced subsidy of 90%, you just need to pay around $2,700, and on top of that, you can use the $500 SkillsFuture Credit that you will be receiving therefore paying only $2,200. After graduating from the Master Craftsman programme, you can become a certified Master Craftsman, like Mr Kenneth Koh. Kenneth started off as a machinist in JEP Precision in 1992, after completing his Nitec. He participated in this programme, and when he graduated in 2013, he was promoted to Senior Manager, and enjoyed a pay increment of about 20%. He is now leading the entire manufacturing engineering department in his company, delegating projects and providing training to his colleagues. d. Many PMETs have busy work schedules or heavy family commitments and are unable to commit to a fixed, long period of training. This is the third aspect where SkillsFuture will help – to inject more flexibility into the training landscape to cater to their varying needs. As Minister Heng mentioned, MOE will expand the range of flexible, bite-sized modular courses offered by our IHLs. Under SkillsFuture, WDA will also aim for at least 75% of courses offered by its training partners to incorporate online or workplace learning components. Providing Good Avenues To Take On New Jobs 33. There are also PMETs who are switching jobs mid-career for various reasons – some to pursue their passions, to join a growth industry, or because their companies are restructuring. The third prong of support for PMETs is thus to provide them with good avenues to take on new jobs, through place-and-train programmes. a. We will enhance the Max Talent Programme. In Apr 2012, we introduced the pilot Max Talent place-and-train programme, to help PMETs access good opportunities in SMEs, and at the same time, enhance opportunities for SMEs themselves. In the past two plus years, there have been 1,000 successful placements, with a good 6-months retention rate of over 80%. Given the positive feedback, we will enhance this programme with stronger career development components, and will work towards matching 3,000 PMETs with SME jobs over a three-year period. The enhanced programme will be called P-Max, and is open to all PMETs at various stages of their career, including those who are currently unemployed. P-Max for PMETs. b. If you are thinking of switching to a completely different sector, one option is to take up, as mentioned earlier, a Professional Conversion Programme. Just last November, we had substantially increased the monthly salary support given to employers who hire PMETs on a PCP in the place-and-train mode, from the previous 70% of basic monthly salary, up to 90%. This enhanced support is targeted at PMETs who are aged 40 years and above, or those unemployed for six months or more. Employers have found the PCPs very helpful. Dr Vincent Ng, Executive Director of AMKFSC Community Services, said that his company had a very positive experience with hiring PCP trainees, as they are very dedicated to making a positive impact in society, and also bringing with them a wealth of life experiences . He found the salary support from the Government particularly helpful in alleviating manpower costs, especially for the social service sector, as many organizations do face very tight resource constraints. Stepping Up Job Matching Efforts 34. Lastly, we will step up our placement and job matching efforts for those PMETs seeking dedicated help. WDA will complement its existing career services for PMETs through collaboration with private search and placement firms. This will help to widen the network of jobs that PMETs can access. Implications and Direction for Foreign Workforce Policies 35. To complement what we are doing for locals through the SkillsFuture and the various PMET measures, we will also continue to take progressive steps to raise the productivity of our foreign workforce. Today, employers pay lower levies for higher skilled R1 workers compared to less skilled R2 workers. It encourages companies to hire skilled workers who are more productive, but who at the same time are likely to command higher wages. Improving Productivity in The Process Sector 36. Mr Christopher De Souza would be pleased to know that this year, we have worked with the Process sector to implement several productivity-enhancing initiatives. First, we will enhance the Process R1 criteria to be more reflective of market-relevant skills. The current skills test pathway will be paired with a salary requirement, to ensure that only workers whom employers value are given R1 status. We will also introduce a new salary plus experience pathway. So those better-paid workers who have worked in Singapore for some time can be R1, and employers who hire and retain them will benefit from lower R1 levies. This is in line with Mr Yeo’s suggestion to provide levy incentives for better skilled workers. In fact, the enhanced criteria will be a more reliable way of identifying workers who are genuinely skilled and productive. These changes will kick in in 2017, to give companies time to retain and to train their workers up to this level and therefore to enjoy lower R1 levies. 37. The skills tests for R1 recognition will also be harmonised under the Process WSQ to provide skills upgrading and multi-skilling progression pathways. This will be further supported by a policy change to allow employers to hire experienced WPHs at the end of their WP term or any time with the previous employer’s consent, without having to send them back to their home country first. These changes are in line with what Mr Yeo Guat Kwang’s concept of a progressive skills recognition framework, as well as his suggestion to allow employers to hire experienced WPHs without them having to be sent home first at the end of their contract. It will support the retention of a more experienced and skilled workforce. Providing Greater Assurance in Retirement 38. Now let me turn to another important issue affecting Singaporeans – that is with regards to assurance in retirement and the role of our CPF. We have been making concerted efforts to provide greater assurance to Singaporeans in old age on three fronts: (1) healthcare needs, (2) housing needs; and (3) cost of living needs. On the healthcare front, the various healthcare subsidies, and most importantly, MediShield Life, will offer better protection for all. The Pioneer Generation Package will also help the current elderly better meet their healthcare needs. And this will help to alleviate the cost of burden on their families as well. Our home ownership rates across income levels are among the highest in the world. In recent years, we have further increased housing grants to help middle and lower income households own their homes. In addition, the GSTV cash payouts and Service & Conservancy Charges (S&CC) rebates serve to help lower-income households with costs of living. Eligible older Singaporeans will also receive an extra Seniors’ Bonus to help with daily expenses. 39. We have also been systematically taking steps to help boost Singaporeans’ retirement savings and income. We top up the CPF accounts of low-wage workers via Workfare, and introduced Extra Interest for smaller CPF balances. As announced by DPM Tharman in his budget speech, we will raise the CPF salary ceiling, increase CPF contribution rates for older workers, and provide an additional tier of Extra Interest for older CPF members. We will also introduce the Silver Support scheme, which will be a permanent scheme, to provide a regular income supplement for the less well off elderly. These changes will take effect in 2016. 40. Mr David Ong has supported the move to increase CPF contribution rates for older workers but some have also asked if rates can be increased further for those over the age of 55. In this round of adjustments we will be restoring the CPF contribution rates for workers aged 50-55 to the same level as younger workers and also making smaller increases to the rates for those aged 55-65. Now it’s important to understand CPF contribution rates for older workers were lowered in the past primarily to reduce their hiring costs and ultimately to improve their employability for older Singaporeans. That is really the key focus. We are more ready to remove this disparity in rates for the 50-55 age band because the employment rates for this group has improved considerably and is almost on par with younger workers. However, it would not be prudent at this stage to raise the contribution rates of those above 55 too quickly as the employment rate in this group is still considerably lower than for those who are younger. 41. Ms Lee Li Lian spoke about the need to provide greater flexibility within the CPF system. The truth is the CPF system has evolved over the years to cater to the needs of Singaporeans, and this has meant introducing various forms of flexibilities that members enjoy today. In fact, some have criticised that there is too much flexibility, for example the flexibility to draw on their CPF funds for training, or for the education of their children, or to invest in a variety of financial instruments under the CPFIS. The CPF’s core purpose, however, must continue to be about providing for the retirement needs of Singaporeans. That is why I was glad to hear Mr Gerald Giam affirming the Workers’ Party’s position on the need for enforced savings, without which he and many others “would have saved much less for retirement”, and that “the Workers’ Party is not asking for CPF members to be allowed to withdraw all their CPF money in a lump sum”. And I think this reflects how important it is for us to balance the need for flexibility and the need to continue to provide for retirement adequacy for the long term. 42. Last month, the CPF Advisory Panel announced Part One of its recommendations. These were made following a period of consultation and engagement with Singaporeans from all walks of life. The Panel’s recommendations are part of that journey to introduce more flexibility to cater to the needs of members today while bearing in mind that retirement adequacy remains CPF’s primary objective, especially as longevity is upon us – more Singaporeans are going to live longer. How do we ensure that retirement adequacy continues for many years to come? 43. It is not easy to find the right balance between adequacy, flexibility, and simplicity, and I think the Panel has done a good job in trying to steer this path. The Government has accepted the Panel’s recommendations. Let me walk you through how the Panel recommendations will affect the key decisions Singaporeans will need to make as they approach their retirement. Reaching 55: Clearer choices for desired payouts in retirement 44. Let’s take a look at Mr Tan who is 54 this year and turning 55 in 2016. Mr Tan works as a sales manager in a department store. He earns about $3,500 a month. He is married with two children. What are the important decisions that he needs to make at age 55 to provide for a secure retirement? Well, first, he needs to think about what monthly income he needs for a secure retirement. How should he go about thinking about this? 45. Does he own a property? Does he have a non-working spouse he will need to support? Does he have private savings outside of the CPF and how much can he expect to receive in family support? 46. In the case of Mr Tan, like most Singaporeans, he owns a HDB flat, and in most instances at the age of 55, it is fully paid up, so he need not worry about rental expenses in his old age. He also has some savings in his bank account that he has set aside over the years for emergencies, and he has two children who love him and his wife, and he is quite confident they will share the responsibility in looking after him for his old age. But for the purposes of this example, let’s leave out the two children. 47. Let’s say that Mr Tan has about $90,000 in his Retirement Account when he turns 55. This is the median amount that someone at age 55 can accumulate. Having considered the matter, Mr Tan thinks he can get by with the Basic Payout of about $700. This means he will need to set aside $80,500 in his Retirement Account and he can withdraw the rest. 48. Mr Tan’s one important concern is the well-being of his wife who is of the same age. She does not have much CPF because she stopped work quite some time ago to become a full-time homemaker after their children were born. It is important to help family members build up their CPF savings so that they too can have their own CPF LIFE plan and payouts in retirement. Ms Foo Mee Har has asked how we can help stay-at-home mothers to meet their retirement needs. I fully share her concerns. One way we will address this issue is by making it easier for CPF members to transfer their CPF savings to their spouse’s CPF, and Government will provide good interest rates on that as well. Currently, CPF members can only transfer their CPF savings above the Full Retirement Sum to their spouse’s CPF. From next year, we will allow savings above the Basic Retirement Sum to be transferred to the spouse’s account. I hope more Singaporeans will take the opportunity to make such a transfer. Ms Foo suggested making the transfer automatic, or to require spouses’ joint consent before withdrawals of Retirement Account savings can be made. These are very personal decisions and we believe at this stage, it is best left to couples to decide. It would, I think, be intrusive for the Government to intervene. 49. So in Mr Tan’s case, he decides to transfer his CPF savings above the Basic Retirement Sum, a sum of about $10,000, to his wife. It’s a win-win situation for him and his wife because if he had left the money in his CPF account, he would be the only one earning the higher interest rates on the first $60,000 of up to 6%. By making the transfer, both Mr and Mrs Tan can enjoy the benefits of these higher rates. If Mr Tan had kept this $10k in his own account, he would be earning 4%. But with the transfer, this same $10,000 will be earning up to 6% interest for Mrs Tan. This is a very significant extra 2% interest on top of the already attractive 4% interest rate. 50. Mr Tan also has some private savings and he isn’t very pleased every time he opens his bank book. The interest rate he is earning is less than 1%. He thought of investing in the stock market but is unsure of what might be a good investment and in his older years, he really does not want to risk his savings. He decides to use $25,000 of his personal savings to top up his wife’s CPF account to further boost her CPF savings. This will earn up to 6% in Mrs Tan’s CPF account. This is much higher than the interest in the bank of less than 1%. Mrs Tan also turns 55 next year, and by the time she is 65, this $35,000 top-up, comprising $10,000 from Mr Tan’s CPF and $25,000 from private savings. In this 10 years, how much would it have grown based on interest? Well, it would have grown with interest to about $60,000. She will now have her own CPF LIFE plan and will receive monthly payouts of about $340 for life. 51. While Mr Tan has decided that he needs only the payout from the Basic Retirement Sum for himself, there are others who may desire a higher monthly payout in retirement. They can choose to top up their Retirement Account up to 3x the Basic Retirement Sum (also known as the Enhanced Retirement Sum), after they turn 55. Some have said that only the wealthy top few percent will be able to benefit from the Enhanced Retirement Sum. Not so. 35% of active members at the age of 55 in 2013 had CPF savings above the Full Retirement Sum. And come 2020, the proportion is estimated to rise to about half of all active members. They can also top up to beyond the Full Retirement Sum and enjoy the high interest rates. 52. Furthermore, 90% of elderly households are home owners, and if they decide to downsize during retirement, to something smaller which is easier to manage, or participate in the various monetisation schemes, the new flexibility of an Enhanced Retirement Sum will provide them with a useful option for placing their cash proceeds in their CPF account. Reaching 65: Enjoying Payouts from Your CPF Savings 53. Let’s fast forward 10 years and walk Mr Tan through the decisions that he has to make at age 65, as he enters the retirement phase of his life. 54. The savings that Mr Tan set aside in his Retirement Account at age 55 will have now grown with interest and working contributions. He now needs to decide on three things. 55. First, he needs to decide whether to withdraw up to 20% of his Retirement Account savings in a lump sum. This is one of the new flexibilities recommended by the CPF Panel. So how should he choose? Some people may need that lump sum immediately for various reasons. Others will not want to make a withdrawal because it means lower CPF LIFE payouts, or because they have already set some other funds for emergencies. 56. In the case of Mr Tan, he doesn’t think he needs the money straight away but he likes the fact that there’s flexibility of having a lump sum that he can withdraw as a safety buffer in case of unforeseen family circumstances that may arise in the next few years. What can he do? Well, we will allow, indeed encourage, him to leave the 20% in his CPF. He can withdraw it later when he needs to. 57. The second decision that Mr Tan has to make is whether to start his CPF LIFE payouts straight away at age 65 or whether he can afford to wait to a little bit later, perhaps up to age 70. Now, he is a healthy man and is keen to carry on working. About 40% of Singapore residents aged 65 to 69 continue to work 12 . And I believe with the extension of the Retirement and Reemployment Act and with more Singaporeans in good health, many will continue to work as part of active ageing. He does not need his payouts to start as he continues to earn an income from work. He also knows that by deferring his payout start age, he can get a permanently higher monthly CPF LIFE payout. Every year he defers his payout start age his monthly payouts go up by 6 - 7% permanently. So if he carries on working and starts drawing on his CPF savings only at age 70, he can get a payout that is as much as 30% more. He decides this is a prudent thing to do, so long as he is still able to work. He knows if he were to stop working for whatever reason, he can start his CPF LIFE payouts at any time between the ages of 65 and 70. 58. Finally, the third issue that Mr Tan will have to decide on is which CPF LIFE plan he wants. Well, as we know, there are two CPF LIFE plans to choose from – one that gives you a higher payout, and lower bequest and the other that gives you a lower payout but a slightly higher bequest. Today, members are asked to choose their CPF LIFE plan at age 55, even though their payouts will start some ten years later at their payout eligibility age. From Jan 2016, members will only need to choose their CPF LIFE plans from age 65 at the point when they wish to start payouts from CPF LIFE. In the case of Mr Tan, he decides to start his payouts later at age 70 and will only need to choose his CPF LIFE plan then. His savings will only be committed to CPF LIFE when he makes his plan choice. 59. These are all important decisions that Mr Tan has to make at age 55 and 65, and the choices he makes will have consequences on the type of retirement that he will enjoy. Mr Zaqy Mohamed and Mr Seng Han Thong asked about how we are communicating the CPF changes to members to help them make better decisions. I share the concern that with more options, with more decisions to make, it does become more complex. That is inevitable. If we want something simple to understand, we will have very few choices, very few options. We can’t run away from that. But we believe that this flexibility that is being woven in is important. 60. Let me assure the House that my Ministry and the Central Provident Fund Board are committed to guiding members through these critical junctures as they transit from their working life into retirement. We will scale up and intensify our efforts to first raise awareness and understanding of the CPF system and the new changes. 61. We are also working on making available guided one-to-one retirement planning service to CPF members to help them better understand the various CPF options and decide on the option best suited for their individual needs and circumstances. We have actually just completed a 3-month trial project and will pilot a retirement planning service in the second half of this year. We plan to ramp up the service gradually from 2016. Our priority will be members who are approaching 55 and may need the service most, such as those with outstanding housing loans and may be affected by the transfer of their Ordinary Account savings to the Retirement Account at 55. We hope such services will help members navigate the CPF system better and make better use of their CPF savings. 62. Ms Foo Mee Har and Ms Lee Li Lian also asked whether more flexibility can be provided for the use of Retirement Account savings for housing. This is an issue that has been raised several times in Parliament by various members in this House. Although the number of people affected by this is quite limited, the fact is that it is challenging for those who are affected. Last July, I explained that we already exercise some flexibility in the use of CPF for housing after 55. But the transfer of CPF members’ Special Account (SA) and Ordinary Account (OA) savings to the Retirement Account (RA) at the age of 55 is necessary to help them earn a higher rate of return overall so that they will have more savings and higher payouts in retirement. Remember the example of the impact 10 years had on Mr and Mrs Tan’s RA balances? That is exactly what we mean. 63. Let me take this opportunity to explain to members what flexibilities continue to exist for the use of CPF for housing after the age of 55. 64. First, the OA continues to exist even after the RA is created. Any new contributions to the OA after the age of 55 can continue to be used for housing. Because many people continue to work after 55. In addition, any money in the RA in excess of the Basic Retirement Sum can also be used for housing. 65. Second, we have, on appeal, allowed CPF members to use savings in their RA that originated from their OA to meet their housing needs even if their RA savings are below their Basic Retirement Sum. For the amount of monies that have been swept to the RA, we have on appeal looked at how they can use some of these to meet housing needs. 66. Third, CPF members turning 55 can also opt to use their OA savings to fully or partially redeem their outstanding housing loans if they have concerns with their ability to continue to service their housing obligations after the transfer of savings to their RA at age 55. Members can request to leave in the OA the monies they may require for housing obligations, and not transfer these monies to the RA at 55. But it is important that they understand, that these savings in the OA will not enjoy the RA rates of up to 6%. CPF Board will be including this information in its letters to members turning 55 this year, so they can consider if they want to exercise these options. 67. While these flexibilities will help CPF members meet their housing needs, I think it is important to emphasize this: members should bear in mind that further expenditure and use of these monies will deplete their CPF cash savings for retirement. I urge CPF members to be prudent with their housing purchases, especially when buying or upgrading a property at an older age. MND and HDB have already taken steps to manage the housing loans that are available. This will also help individuals not overspend in their housing consumption. I think it’s important to pay attention to this because older members may have to take on loans with shorter tenures, higher monthly instalments and they should also factor in any decline in CPF contributions as they age, which may mean that they may need to service their monthly housing instalments with cash on top of CPF. But these are decisions that individuals need to bear in mind. Retirement Adequacy for Younger Cohorts 68. While the CPF Panel’s recommendations will offer Singaporeans more flexibility and options to better plan for their retirement, some are worried that their fellow Singaporeans might not be able to save up enough in their CPF accounts to meet the Basic Retirement Sum. The numbers can be quite mind-boggling for young Singaporeans just entering the workforce. 69. Let me try to reassure younger Singaporeans by using the example of Ben, a 25 year old polytechnic graduate who has just started work, with a starting salary of $2,200. The median starting salary for a polytechnic graduate today is about $2,400 but I thought, let’s be a bit more conservative and take the rates which were applicable a few years ago. Now that he has a job and is earning an income, Ben is thinking of proposing to his fiancée and is looking around the market to purchase a home. I hope he decides to purchase a home within his means – there is no better deal than a HDB BTO flat if he qualifies for one. Let’s say Ben decides to buy a 4-room BTO in Punggol with his wife-to-be, and both of them use their CPF savings to pay for their home. As this is their first flat, they will enjoy a substantial housing grant. It is likely they will be able to fund their housing needs without needing to draw on cash. 70. Ben works regularly, and his salary grows over time. He and his employer contribute on a consistent basis to his CPF account – let’s assume that he only works for 32 out of 40 years, between the ages of 25 and 65. So 8 years, here and there, he takes time off, changing jobs. By age 50, it is estimated that Ben would have fully paid off his home loan, and by age 65, he would have accumulated sufficient CPF savings to purchase a CPF LIFE policy that will give him a monthly payout that is roughly 60-70% of what he used to earn before retiring. 71. How are we able to do this? Many people will wonder. A lot of it has to do with the effect of compounding on our CPF savings. Let me illustrate with a simple example. For someone with a salary of $2,200, he and his employer will contribute $130 per month into his CPF Special Account alone. This contribution will grow up to $250 per month as more gets allocated to his Special Account as he gets older. Let’s assume that he works, similar to Ben, only 32 out of 40 years. And I will not include any wage increases that he is likely to enjoy over the course of his lifetime. If these contributions were to be set aside in a Khong Guan biscuit tin under his bed, what would the amount be by the time he reaches 65? $55,000, that’s what you will get when you consistently save that $130 to $250. But it is not in the Khong Guan biscuit tin. It is in the CPF Special Account. It is “special”, because his monthly contribution earns interest of up to 5% before age 55, and up to 6% thereafter. Adding the interest earned, what do you think would be in his CPF SA at age 65? $165, 000 – three times what he put in. If he works 36 out of 40 years, the $60,000 he would have accumulated would grow to $180,000. And this is solely looking at what he put in his SA. This is not magic, it is just math. This is a very conservative estimate – it does not even account for wage growth or whatever savings he has accumulated in his Ordinary Account after paying off his flat. If you add those, clearly he would have even more. 72. My point in sharing this example with you is to highlight that the retirement picture for younger Singaporeans is healthy, and most Singaporeans who work regularly and make prudent housing choices should have no worries meeting their retirement needs. 73. Mr Pritam Singh suggested that we step up awareness on employers’ responsibility for CPF contributions for part-time workers and to encourage employees to step forward if they don’t receive their rightful contributions. That’s absolutely essential, because as you can see, the compounding effect that you have in your CPF accounts matters, especially for lower income, less educated members. Which is why the “WorkRight” campaign started in 2012 to improve compliance with employment laws and we have stepped up our public education efforts to increase awareness. We have increased our capabilities ten-fold. So my assurance is we will keep up this effort and we don’t plan to ease off. 74. We recognise that there will be a number of Singaporeans, particularly low-income elderly and non-working women, who will have low balances because their wages had been low, especially for those who grew up in the third-world Singapore where their wages had been lower, or they may have been unable to work for medical reasons or because they had to be caregivers at home. There have been calls for more targeted help for the latter group, to improve their retirement adequacy. I agree with the ST Opinion piece on Saturday that the social pension systems in Japan and some of the western countries providing targeted retirement welfare for women might not be the best solution, given issues with long-term sustainability. 75. Our support for non-working women is two-fold: First, we encourage non-working women to get back into the workforce. I am glad to note that Labour Force Participation Rates (LFPR) for women have risen over the years and the difference in average CPF balances between men and women have started to narrow. In fact, from 2003 – 2013, we have seen a higher growth rate in the net CPF balances of females as compared to males. We also introduced WorkPro in 2013 to support the employment of our local workers, especially the economically inactive and older workers. WorkPro will help employers put in place work-life measures such as flexible work arrangements so that more economically inactive Singaporeans can return to work. It will also support job-redesign and training costs, in an effort to improve job-fit and retention. There is also generous funding of up to 90% for economically inactive Singaporeans, to help them acquire the requisite skills to find a job more easily. 76. Second, family remains as an important pillar of support for women. As mentioned earlier, we have enhanced the rules to make it easier for CPF members to transfer their CPF savings to their spouse’s CPF. And we will pay out attractive interests for these accounts so topped up. I urge all Singaporeans to consider how to maximise the CPF system to boost your family’s retirement adequacy, especially to look after your loved ones who perhaps have lower CPF balances because they have taken time off work to look after the family. 77. Our social safety nets should remain and be strengthened for the vulnerable groups. The Government and the CPF system alone will not be able to solve all problems. This is a collective responsibility. Individuals, families, employers, social groups, will all need to step in to provide the assistance and support. Let me reiterate some of the key points raised by DPM Tharman during Budget speech on our overall retirement support framework. 78. Firstly the CPF will continue to play a core role in helping us meet our retirement needs. It is a social security savings scheme that embodies a tripartite approach to retirement adequacy, with individuals taking some responsibility to set aside savings for their old age, employers playing their part through the employer share of CPF contributions, and Government playing a part through various top-ups and supplements to the CPF. It is an important pillar in the overall retirement support framework for the majority of Singaporeans who work and contribute to their CPF accounts. 79. Secondly, the CPF is not the only pillar of retirement adequacy. In Singapore’s context, housing is a key pillar as well. 90% of elderly households are home owners. This is a remarkable statistic. Because of our high home ownership rates, the large majority of Singaporeans do not have to worry about paying rent in retirement. Our homes are a place of emotional refuge, but it can also be a valuable asset that can supplement our retirement income, if needed. We know many elderly folks may find that their four or five-room flat is a lot larger now that their children have moved out and they may want to downsize to something more manageable. We can rent out a room, right-size to a smaller flat or join HDB’s monetisation schemes and get some additional income for our retirement. 80. Thirdly, healthcare via Medishield Life. MediShield Life will provide better healthcare protection and coverage for all, while keeping the premiums affordable. This is on top of the various healthcare subsidies that Singaporeans now enjoy. And also not forgetting, the Pioneer Generation Package that which will go a long way to help a very special group of Singaporeans meet their healthcare needs for life. At the same time, it is important to remember that this will relieve the financial burden on their children as well. 81. Fourthly, the Government will do its part to supplement the retirement savings of those who are more vulnerable in our society through various CPF top-ups and cash subsidies including the Workfare Income Supplement scheme, GST vouchers and the Seniors’ Bonus. The Silver Support scheme will be another major plank in our retirement support framework for Singaporeans. Conclusion 82. Madam Chair, there are many details involved in trying to translate our vision into reality. It’s easy to get lost in the details, but details matter. As I mentioned, we are a democracy of deeds, not just words. We are trying to build a better society, one where we have good jobs and opportunities for all Singaporeans. Therefore we need to nurture an environment and an economy that can provide for that. We need to provide opportunities for higher incomes, and we need to provide a secure retirement for all Singaporeans. And this is anchored on the four pillars that I just shared – the CPF system, housing, healthcare, and the fourth pillar – providing for lower-income Singaporeans via Workfare during their working life, and in their latter years, via the Silver Support Scheme. The social safety nets will be there to help catch hold of those who invariably falter and may be disadvantaged. These are the pillars upon which our society have to be built. They are not just physical edifice, these are structures put in place by Singaporeans for Singaporeans. Ultimately this is what we are trying to build here in Singapore. It is work in progress, but I think it is good work. Against all odds, we have done well in the last fifty years. In the next fifty years, I am confident that we can do better. Thank you.

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